FRANKFURT, June 5 (Reuters) - Deutsche Bank warned that potential fines stemming from a range of investigations could threaten its capital base, casting a shadow over an 8.5 billion ($11.6 billion) capital hike that had soundly beaten price expectations.

Deutsche Bank cautioned that performance at its investment bank, its largest division, had weakened in April and May and that potential fines could complicate efforts to comply with regulatory capital minimum requirements.

The warnings came only hours after Germany’s largest bank priced its rights issue at a higher than expected 22.50 euros per share, enabling it to raise more capital than anticipated to fortify its regulatory ratios and pay for a restructuring.

In a 500-page prospectus published as part of the issue, Deutsche listed a series of potential threats, saying an ongoing global probe into currency price manipulation and a U.S. probe into financial dealings with Iran posed material risks.

“The increasingly stringent regulatory environment to which Deutsche Bank is subject, coupled with substantial outflows in connection with litigation and enforcement matters, may make it difficult for Deutsche Bank to maintain its capital ratios at levels above those required by regulators or expected in the market,” the bank said.

The 6.75 billion euro rights issue forms the lion’s share of a two-part capital hike totalling 8.5 billion euros announced by the bank in mid-May.

Deutsche has been dogged by investigations launched in the wake of the financial crisis, paying over 5 billion euros in fines and settlements in the past two years. Analysts at Credit Suisse recently estimated that Deutsche faced another 3.9 billion euros in litigation costs.

Deutsche Bank has set aside 2 billion euros in legal provisions in anticipation of further fines or settlement costs.

Investors welcomed the rights pricing cautiously but pushed the shares down 2.5 percent after the bank published the legal warnings, making it the biggest loser among European banks . “The enthusiasm has its limits,” said one of the bank’s top ten shareholders under the condition of anonymity.

“It is good that DB is beginning to fill the real and perceived capital gap that they have suffered since the financial crisis,” said a European fund manager. “The equity issue is necessary to achieve this and it good to see management dealing with this despite the large size of the deal.”

LAST MAN STANDING

The bank has spent more than two weeks marketing the rights issue to shareholders, with co-Chief Executives Anshu Jain and Juergen Fitschen promising both cost cuts and business growth as part of a turnaround plan.

Deutsche sees itself as Europe’s last man standing in the investment banking sphere after a pull-back by Barclays , UBS and others left a gap that it aims to fill as a top debt trader.

It wants to fortify its position in North America and Asia in wealth management and investment banking while modernizing its domestic retail franchise in Germany.

But at least half of the new money will go to filling new capital demands triggered by regulatory reforms, bank officials have told investors.

The price of 22.50 euros per share represents a discount of around 21 percent to the theoretical share price accounting for the dilution of the new shares, meaning Deutsche was not forced to offer the shares at a huge discount.

That compares favourably to discounts of 33-38 percent for recent capital hikes by Commerzbank, Sabadell and Barclays.

Trading in the subscription rights on the German stock exchanges is expected to take place from June 6 to June 20 and in New York from June 6 to June 18.

Deutsche shares have fallen some 16 percent since the start of the year compared with a 5 percent rise on average by rivals , partly due to expectations of a dilutive capital hike.

The issue hit a procedural delay on Wednesday that forced the bank to stall the pricing by one day. ($1 = 0.7341 Euros) (Additional reporting by Kathrin Jones and Arno Schuetze in Frankfurt and Freya Berry and Simon Jessop in London; Editing by Giles Elgood)